Axon Enterprise, Inc.

Earnings Conference webinar. This meeting is being recorded. I'm Andrea James, Vice President of Corporate Strategy and Investor Relations. Thank you for joining us today. Today we have available Axon CEO Rick Smith, President Luke Larson, CFO Jawad Ahsan, Chief Revenue Officer Josh Isner, and Chief Product Officer Jeff Cunnings. We were really pleased to bring you the whole team. This team has done dozens of earnings calls together as a public company, but this is the first one where we're all in a different location. Just like you, we're all adapting, and we thank our analysts and our investors for joining us today over Zoom. We do appreciate that today is a particularly crowded earnings day, and I know there's a lot of calls going on right now. Our company has really embraced video conferencing technology to keep connected. We're using custom Zoom backgrounds today, and you'll see seven of them with our executives. Five of the backgrounds are actual future offices of Axons all around the world. And then two of them are not real backgrounds. So if our analysts, if you're joining us today, if you want to guess at which backgrounds are not real, we'll send you some Axon swag if you get it right. Okay, so today, first management will give prepared remarks, and then we will bring our analysts on camera for questions. Analysts, your lines will be muted until it's time to ask a question. Please ask two questions, and if you have a follow-up, you can let us know via the chat window. We'll circle back around depending on time. Axon's moderators, Mark, Doug, and Angel, will be unmuting your lines when we call on you. And if you get into trouble, type your question in the chat window and we'll read it aloud. I hope you've all had a chance to read our shareholder letter, which was released after the market closed. You can find it at investor.axon.com. And our remarks today are meant to build upon the information in that robust letter. If for some reason there's an internet outage beyond our control or we lose Zoom connectivity, we'll make every effort to post a copy of our prepared remarks to investor.axon.com this evening. During this call, we will discuss our business outlook and make forward-looking statements. Any forward-looking statements made today are pursuant to and within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These comments are based on the predictions and expectations as of today. They are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks are discussed in our SEC filings. All right, now let's hear from Rick.

Awesome. Thanks, Andrea. And thank you to everyone for joining us today. We last spoke to you on our Q4 update call on February 27th in what now feels like a very different world, where people ate in restaurants and flew to business meetings and vacations. Three days later, we curbed all non-essential travel for our employees. But our message to our team was very clear. Though we may curb travel or work from home, it does not mean that we are reducing the vigor with which we pursue our missions. Far from it, we are aggressively adapting to new conditions in the world as we zoom into all our meetings, and we will seek opportunities to use this changing environment to leverage our superior adaptability to gain ground against less agile competitors. In the past weeks, Axon has brought forth some major initiatives to address this crisis, including giving free global access to Axon Citizen for the remainder of 2020, and using our supply chain to source PPE for first responders in a nationwide campaign and partnership with the National Police Foundation, which even got the attention of Vice President Pence, who tweeted about it. A large number of Axon employees donated money or personal time to this cause. Our first responders still face significant risks, and we are continuing to match donations for PPE. If you, our investors, are able to support the cause, please do. Help us protect those who keep us safe. go to axon.com slash COVID and scroll down and hit the Donate Now button. Even though I've been working from home and getting a lot more time with my kids, including some pedicures for my daughter, Fortnite lessons for my son, and helping film product demos with my teenager, I personally have had more FaceTime with customers over Zoom than I've ever had even in person. I've been doing about five different Zoom customer meetings a day, and that's far higher than was possible when we had to travel in person to in-person meetings. So my personal customer engagement velocity is way up. And Jawad and I will be attending more investor conferences this quarter than at any time in the past years, as we can now Zoom into those as well. We're proud to be thought leaders on driving technology adoption. and I'm pleased to see how well our customers have adapted to using this technology to be increasingly productive. I was on three customer meetings earlier today and most of them had never used video conferencing before the COVID crisis and now it's become standard. Here's what I'm learning from those customers and what they're telling me. They're working with reduced staff due to personnel being out sick. Customers are seeing this crisis It's forcing them to adapt and change more rapidly than ever and technology will play an even larger role as a cornerstone in every new business process needed in the world post COVID. Whether it's using Axon Citizen to gather evidence from the public or our prosecutor portal for sharing digital evidence with prosecutors and courts, the world is changing and Axon thrives on change. We're even helping some key industry thought leadership group replace their canceled conferences and move them online. Luckily, we have a bit of a reputation for being both innovative and pretty good at throwing great events. So we're loaning our expertise to industry partners to help them thrive in this new world with us. Now let's talk about the future. Our best estimates for the year remain unchanged and our pipeline remains strong. However, customers are relating to us that they're facing large budget shortfalls and uncertainty in the macro environment, unlike anything any of us have ever seen. Currently, our sales pipeline remains solid, but we cannot see over the horizon any better than the rest of you to know how the economy will shake out or if the federal government will step in to provide additional aid to state and local governments. Giving guidance implies a level of certainty that is simply not possible to ascertain right now. To be blunt, in an environment where we see so many companies acknowledging the uncertainties ahead by pulling formal guidance, We believe it would be most prudent to re-characterize our best estimates to acknowledge the higher than normal uncertainty. Hence, we're telling shareholders that even though our business has been very resilient to date and our best estimates have not changed, the level of uncertainty has increased to a level where we are no longer comfortable characterizing those estimates as guidance until the macro environment stabilizes. We don't want to imply that we know something the rest of the world doesn't, namely how the economy will unfold in the coming months. do have chief revenue officer josh isner on the line and during the q a he can speak to the strength of our pipeline if you're interested all that said i couldn't be more bullish on axon we are change agents our adaptability and innovation-centric approaches are unique advantages for us when the world changes rapidly as is happening right now this isn't the first time maxine has faced adversity myself Our president, our chief revenue officer, we were all together managing through the last recession from which we emerged far stronger. In 2008, as the financial crisis ripped the world, we decided to lean in and transform our entire business from being a simple Taser device manufacturing business into an integrated tech company making wearables and cloud software. That transition was anything but easy, and we've had many difficult learning curves to overcome. But as competitors in the public safety space retreated, that's exactly when we advanced into new opportunities and we established ourselves as the clear market leader in cloud-hosted digital evidence management, software, and camera sensors. In the past year, we've now shipped two major software products, Axon Records, which is now live or signed with in-flight deployments at more than a dozen agencies, and Axon Dispatch, which just went live at our first customers. Today, Axon is stronger than ever. We ended Q1 with nearly $400 million in cash and equivalents, zero debt, and an underlying business that generates strong cash flow and high margin recurring revenues. Our Q1 revenue grew 27% year-over-year, and while net income was affected by stock-based compensation expense, our adjusted EBITDA more than doubled year-over-year to $30 million, reflecting a 20% margin. We have several moonshots in progress. Before this decade is out, we will launch a taser weapon that will outperform a 9-millimeter pistol in stopping power. We will continue to make policing transparent and effective, and we will extend our reach across the criminal justice system, making it both more fair and more efficient. We will continue to create great social value for society and great value for you, our shareholders. And with that, I'd like to turn the call over to our president, Luke Larson.

Luke? Thanks, Rick. Since COVID, as a leadership team, we've been laser focused on three key priorities. Number one, the health and safety of our employees. Number two, doing our part to help flatten the curve. And number three, keeping key initiatives going to support our customers. I want to give a shout out to all of Axon's employees. They've really stepped up the last two months. I want to give a specific shout out to Josh Goldman, our VP of Ops, Elizabeth Hart, who heads up our people team, and our entire IT team, for their ability to shift our entire workforce to work from home for all of our knowledge workers, as well as keeping critical mission lines open with CDC recommended guidelines. These actions have allowed us to keep the business up and running to support our customers who are truly on the front lines. Early on in the crisis, we began receiving messages from law enforcement around the globe asking Axon if we will be shipping out Taser 7 and Axon Body 3. From major city police departments to small departments, many of our customers were anxiously awaiting to get their mission-critical devices. Making sure that our first responders have the tools that they need to keep communities safe was a key factor in our decision to keep mission-critical manufacturing lines open. To keep our employees' health and safety and to do our part to flatten the curve, we added a lot of precautions and continued paying employees in high-risk groups, even though they couldn't work. We detailed that in our shareholder letter, and it compressed our taser gross margins by 110 basis points. If there were no COVID-19, beyond our phenomenal Q1 results that kicked off a strong start to the year, the secondary headline this quarter would be that Axon Dispatch went live. This is a major milestone for our company and shows Axon's ability to keep key initiatives going even throughout a global pandemic. We told you last quarter that we would be live by mid-year with our first paying Dispatch customer, and we're thrilled that we launched even a bit sooner. Dispatch is our entry into a $2 billion rapidly growing real-time command and control software market We're pretty thrilled to be powering the 911 dispatching operations for the city of Maricopa, which is our first launch partner. This software is also critical to our mission to protect life. It empowers everyone involved in an incident response, dispatchers, call takers, command patrol officers, firefighters, and medical personnel. The goal here is to shorten the time from hello to hello. That's what the industry calls the time between when somebody first calls 911 to the time an officer arrives. Another key initiative for us is hiring, and I couldn't be prouder of the hiring velocity that we've seen and we continue to accelerate, particularly in this last quarter. As always, leaning in rather than holding back. In particular, Chief Product Officer Jeff Kunnins, who's on the call with us today, has rapidly filled key senior tech leadership roles, including our new SVP of AI, VP of Digital Events Management, and our GM of Axon Air. and more while doubling down to rapidly grow our engineering bench with far-raising talent in our global software hub in Seattle, as well as in Vietnam and Scottsdale. I started out with a shout out to the Axon employees, and I want to end my section with another one. This is a great team that has really leaned in during the crisis to support each other, as well as our customers. Thank you to all of our dedicated employees. And with that, I'll turn it over to our CFO, Jawad Ahsan.